Is It Time To Reassess Tenet Healthcare (THC) After Its 3 Year Share Price Surge?

• If you are wondering whether Tenet Healthcare's current share price lines up with its underlying value, this article is designed to walk you through that question step by step.
• Tenet Healthcare's stock last closed at US$233.77, with returns of 1.2% over 7 days, 23.8% over 30 days, 17.2% year to date, 77.7% over 1 year and 299.3% over 3 years. These figures can change how investors think about both upside and risk.
• Recent news around Tenet Healthcare has focused on its role in the US hospital and outpatient care sector, along with ongoing attention on how health systems are managing costs and patient volumes. These themes help frame why the stock's strong multi year return profile is drawing interest from investors who are looking at valuation more closely.
• Simply Wall St currently assigns Tenet Healthcare a valuation score of 5/6, which reflects how many of six valuation checks suggest the shares may be undervalued. Next, we will compare different valuation approaches before circling back at the end to a broader way of thinking about what the stock is really worth.

Tenet Healthcare delivered 77.7% returns over the last year. See how this stacks up to the rest of the Healthcare industry.

Approach 1: Tenet Healthcare Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company might be worth today by projecting its future cash flows and then discounting those back into a single present value figure.

For Tenet Healthcare, Simply Wall St uses a 2 Stage Free Cash Flow to Equity model based on cash flow projections. The company’s last twelve month free cash flow is about $2.62b. Analyst estimates and extrapolations from Simply Wall St project free cash flow out over the next decade, with 2035 free cash flow estimated at around $2.71b on an undiscounted basis.

When these projected cash flows are discounted back to today, the model arrives at an estimated intrinsic value of about $641.65 per share. Compared with the recent share price of US$233.77, this implies the stock is 63.6% undervalued according to this DCF approach.

This model suggests that, based purely on projected cash flows and the assumptions behind the discount rate and growth profile, Tenet Healthcare’s current price sits well below its calculated intrinsic value.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Tenet Healthcare is undervalued by 63.6%. Track this in your watchlist or portfolio, or discover 56 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Tenet Healthcare.

Approach 2: Tenet Healthcare Price vs Earnings

For a profitable company, the P/E ratio is a straightforward way to see what investors are paying for each dollar of earnings, so it is a helpful cross check alongside the DCF work you saw earlier.

A higher or lower P/E often reflects what the market thinks about a company’s growth potential and risk. Faster expected earnings growth or lower perceived risk can support a higher “normal” P/E, while slower growth or higher risk can pull that multiple down.

Tenet Healthcare currently trades on a P/E of about 14.45x. That sits below both the Healthcare industry average P/E of roughly 24.08x and the peer average of about 25.78x. Simply Wall St’s Fair Ratio for Tenet Healthcare is 22.14x. This is its proprietary view of what a “reasonable” P/E could be for this company given factors like earnings growth, industry, profit margins, market cap and risk profile.

The Fair Ratio is more tailored than a simple comparison with peers or the wider industry because it tries to adjust for Tenet Healthcare’s own characteristics rather than assuming all healthcare stocks deserve the same multiple. Since the current 14.45x P/E sits well below the 22.14x Fair Ratio, this approach points to the shares looking undervalued on an earnings basis.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Tenet Healthcare Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St’s Community page you can use Narratives, where you attach your own story about Tenet Healthcare to a set of revenue, earnings and margin assumptions. You can then link that story to a Fair Value and see it next to the current share price to help you decide whether the stock looks expensive or cheap for your goals. It will update automatically when fresh news or earnings arrive. For example, a bullish investor who agrees with a Fair Value of about US$288 and an upper price target of US$230 can compare their view directly with a more cautious investor who anchors on a Fair Value near US$199.75 and a lower price target of US$137, all within the same simple framework.

For Tenet Healthcare, however, we will make it really easy for you with previews of two leading Tenet Healthcare Narratives:

Each one pulls together its own view on revenue, margins, valuation and policy risk so you can see which story feels closer to your own expectations.

🐂 Tenet Healthcare Bull Case

Fair value in this bullish narrative: US$288.00 per share

Implied undervaluation versus the last close of US$233.77: about 18.8%

Revenue growth assumption: 5.21% per year

• Focuses on growth in high acuity outpatient procedures, a stronger payer mix and portfolio reshaping toward higher margin assets.
• Builds in ongoing investment in ambulatory platforms, digital tools and cost control, alongside share count reduction through buybacks.
• Aligns with higher analyst price targets, using earnings and P/E assumptions that support a Fair Value near US$288 while still applying a discount rate from the company report.

🐻 Tenet Healthcare Bear Case

Fair value in this cautious narrative: about US$199.75 per share

Implied overvaluation versus the last close of US$233.77: about 17.0%

Revenue growth assumption: 3.76% per year

• Emphasizes limits to revenue growth if payer mix and patient acuity stop improving at the same pace and if Medicaid related benefits ease.
• Highlights the risk that heavy use of buybacks and ongoing M&A do not translate into durable earnings power or margin support.
• Anchors on the lower end of analyst targets, with more conservative assumptions for future margins, earnings and P/E multiples, and a slightly higher discount rate.

Taken together, these two narratives bracket a wide but clearly defined valuation range, from roughly US$200 to US$288, and provide a structured way to decide which assumptions around growth, policy, margins and capital returns you are more comfortable with.

If you want to go deeper into either story and see how the numbers change as assumptions move, the full narratives for Tenet Healthcare are available on Simply Wall St and can be tracked alongside the live share price.

Do you think there's more to the story for Tenet Healthcare? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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